PROFILE ON BEE HIVE FRAME by nikeborome

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									170. PROFILE ON BEE HIVE FRAME
                         170- 2
                      TABLE OF CONTENTS


                                                  PAGE
 I.    SUMMARY                                    170-3


II.    PRODUCT DESCRIPTION & APPLICATION          170-3


III.   MARKET STUDY AND PLANT CAPACITY            170-4
       A. MARKET STUDY                            170-4
       B. PLANT CAPACITY & PRODUCTION PROGRAMME   170-6


IV.    RAW MATERIALS AND INPUTS                   170-6
       A. RAW & AUXILIARY MATERIALS               170-6
       B. UTILITIES                               170-7


V.     TECHNOLOGY & ENGINEERING                   170-8

       A. TECHNOLOGY                              170-8
       B. ENGINEERING                             170-9


VI.    MANPOWER & TRAINING REQUIREMENT            170-11
       A. MANPOWER REQUIREMENT                    170-11
       B. TRAINING REQUIREMENT                    170-11


VII.   FINANCIAL ANALYSIS                         170-12
       A. TOTAL INITIAL INVESTMENT COST           170-12
       B. PRODUCTION COST                         170-13
       C. FINANCIAL EVALUATION                    170-14
       D. ECONOMIC BENEFITS                       170-15
                                        170- 3
I.     SUMMARY


This profile envisages the establishment of a plant for the production of bee hive frame
with a capacity of 2,000 pieces per annum.


The present demand for the proposed product is estimated at     42,420 pieces per annum.
The demand is expected to reach at 76,396 pieces by the year 2020.


The plant will create employment opportunities for 18    persons.


The total investment requirement is estimated at about Birr 1.81 million, out of which Birr
90,000 is required for plant and machinery.


The project is financially viable with an internal rate of return (IRR) of 16 % and a net
present value (NPV) of Birr 476,820 discounted at 8.5 %.


II.    PRODUCT DESCRIPTION AND APPLICATION


Modern bee keeping equipment comprises of beehives, Bee smoker, Queen Extractor, Wax
press Honey extractor and protective clothing, etc. In this study only moveable frame of
Langs froth hive is considered, as this is the most demanded by modern bee deeper to
replace the old traditional beehives.


In moveable-frame hives, the bees construct comb in frames which contain an embossed
sheet of beeswax foundation which serves as a “pattern” to ensure straight, centered combs
in the frames. These hives are constructed so that there is a bee space between the frames
themselves and between the frames and the box holding them.


Communicating hive boxes can be stacked one above another, and that the queen can be
confined to the lowest chamber (brood), by means of a queen extruder. In this way, the
upper chambers (called supers) can be reached only by the workers and therefore contain
only honeycomb.      This made hive inspection and many other management practice
                                 170- 4
possible. Commercial hives operating on the Langsfroth pattern may contain 10 to 13
frames. The project is resource based.


III.   MARKET STUDY AND PLANT CAPACITY


A.     MARKET STUDY


1.     Past Supply and Present Demand


Beehive frame is used for bee keeping in a safe way and with better handling. Currently,
the demand for the product is met through domestic production. The Southern Nations and
Nationalities Region (SNNR) is one of the most know potential areas for bee keeping in
the country. According to the resource potential study, the region has a total of 1,114,303
beehives, of which 1,060,512 are traditional, 50,980 are modern and 2,811 are
intermediate. The annual honey output of these hives is about 9,384 tons, of which about
72% is obtained from traditional hives.


On the average, traditional, intermediate and modern hives respectively yield about 5 kg,
15 kg and 25 kg of honey annually. This marked difference in output is likely to induce
farmers to replace traditional beehives with modern and improved ones. In determining
the present demand for beehive frames, following the study of apiculture equipment
conducted for the region, the existing traditional beehives are conservatively assumed to be
replaced with modern ones in the coming 25 years. The present effective demand for
beehive frames is thus estimated at 42,420 pieces per annum (i.e. 4% of the existing
traditional beehives).


2.     Demand Projection


The method used to determine the present effective demand is applied in projecting the
demand for beehive frame. The projected demand for the product is shown in Table 3.1.
                                     170- 5


                                         Table 3.1
             PROJECTED DEMAND FOR BEEHIVE FRAME (PIECES)


                                 Year             Projected Demand
                                 2007                    42420
                                 2008                    44117
                                 2009                    45882
                                 2010                    47717
                                 2011                    49626
                                 2012                    51611
                                 2013                    53675
                                 2014                    55822
                                 2015                    58055
                                 2016                    60377
                                 2017                    62792
                                 2018                    65304
                                 2019                    67916
                                 2020                    70633
                                 2021                    73458
                                 2022                    76396


3.     Pricing and Distribution


According to knowledgeable source, the price of beehive frame is about Birr 375 per piece.
This price is adopted for the product of the envisaged plant.


The product can get its market outlet through the existing agricultural inputs and
equipment distributing enterprises throughout the region. Close collaboration with the
Region’s Bureau of Agriculture is imperative to promote the product.
                                       170- 6


B.     PLANT CAPACITY AND PRODUCTION PROGRAMME


1.     Plant Capacity


The annual production capacity of beehives production project is 2,000 pieces, based on
300 working days and a single shift of 8 hours per day. This capacity can be increased by
increasing the number of working hours per day.


2.     Production Programme


Table 3.2 shows the production programme of the envisaged project. At the initial stage of
the production period, the plant requires some years to penetrate into the market.
Therefore, in the first and second year of production, the capacity utilization rate will be
70% and 85%, respectively. In third year and thereafter, full capacity production shall be
attained.
                                          Table 3.2
                             PRODUCTION PROGRAMME


               Sr.            Product                      Production Year
               No.                                 2007       2008      2009-2016
              1.      Beehives (pcs)               1400       1700         2000
              2       Capacity      Utilization       70       85          100
                      (%)


IV.    RAW MATERIALS AND INPUTS


A.     RAW MATERIALS


Raw materials of the project are seasoned wood (Timber). The wood should be termite
proof, resistant to the rotting effect of the sun and rain, warp-proof and non-bee repellent.
                                 170- 7
SNNPRS is endowed with vast forest resources. According to BOA (1999), about 11% of
the total area of the region is covered by forest. These Patches of forests include broad leaf
forest, mixed forest, riverline forest and plantation forests. In the region forests are located
mainly in Bench-Maji, Kaffa-Shaka, Sidama, South Omo Zones; and Yem and Amaro
Special Woredas. The highest coverage of forestland is found in Kaffa-Shaka and Bench
maji Zones, covering 46.1% and 15.6% of the total forested land surface in the Region
respectively.


The auxiliary materials required are glue and nails which are available locally. The total
annual cost of raw materials is estimated at Birr 191,440.00. Table 4.1 indicates the annual
requirement of raw materials of the proposed project.


                                          Table 4.1
                   RAW MATERIALS REQUIREMENT AND COST
                                   (AT FULL CAPATIY)


         Sr.        Raw Material             Unit of      Qty.     Cost (‘000 Birr)
         No.                                Measure
          1.    Seasoned wood/Timber           m3         120           180.840
          2.    Glue                           Kg         200               4
          3.    Nails                          Kg         300               3
          4.    Others                         LS                          3.6
                        Total                                            191.44


B.     UTILITIES


Electricity and water are the principal utilities of the project.         The annual utilities
requirement and cost are indicated in Table 4.2.
                                    170- 8


                                          Table 4.2
                        UTILITIES REQUIREMENT AND COST


       Sr.         Utility      Unit of        Qty.      Cost (‘000 BIRR)
       No.                     Measure
        1    Electricity         kWh          20,000           9.472
        2    Water                m3            600              6
                Total                                          15.472




V.     TECHNOLOGY AND ENGINEERING


A.     TECHNOLOGY


1.     Production Process


Seasoned wood/Timber is cut into sizes to produce the different components of the
beehives. The width of the wood must be exactly 32mm. The tropical honeybee builds a
comb which has a thickness of 25mm. The comb is usually attached to the center of the
top-bar. A space of 3.5mm is, thus, left at either side of the comb. When two or more top-
bars fixed with combs are placed side by side, the inner space becomes 7 mm. This space,
vital to the bees, is usually called as the “bee space”. These bee spaces are also found
between the combs and the hive body. They serve the bees as path in which they can move
freely, such intricate construction demands relatively good quality wood and expertise in
carpentry.


2.     Source of Technology


Selam Technical and vocational college
Tel:011 646 2942
Web Page: WWW.selamethiopia.org
                                      170- 9
Addis Ababa
Ethiopia


B.     ENGINEERING


1.     Machinery and Equipment


The list of machinery and equipment is indicated in Table 5.1. The total cost of machinery
is estimated at Birr 90,000. The plant needs vehicles (one pick-up) for transportation of
finished product and for office activities. The total cost of the vehicles is estimated at Birr
320,000.


                                           Table 5.1
               LIST OF MACHINERY AND EQUIPMENT REQUIRED


                Sr. No.                 Raw Material                   Qty.
                   1.      Circular saw                                  1
                   2.      Thickness planner                             1
                   3.      Drilling machine                              2
                   4.      Bench grinder                                 1
                   5.      Set of carpentry tools                        2
                   6.      Set of c-clamps                               3
                   7.      Set of parallel clamps                        3
                   8.      Work bench                                    4




2.     Land, Building and Civil works


The plant requires a total of 1000m2 area of land out of which 500 m2 is built-up area
which includes manufacturing area, raw material stock area, offices etc. Assuming
construction rate of Birr 1500 per m2, the total cost of construction is estimated to be Birr
1.5 million. The total cost, for a period of 80 years with cost of Birr 1 per m 2, is estimated
                                   170- 10
at Birr 1000. The total investment cost for land, building and civil works is estimated at
Birr 1,501,000.


3.      Proposed Location


A forest based industry such as the envisaged one need to be located where its major input
is available. Consequently, forest resource of a particular area would be the vital factor for
choice of location.


In SNNPRS woredas which have a significant forest resouce include Bonga Zuria, Gimbo,
Menjewo, Bench, Maji and Masha. On the other hand the target markets of the envisaged
plant are bee keepers. Therefore, apiculture potential is also an important location selection
criteria due to the fact that due to the bulkiness of bee hives, transporting the products
long distance is not feasible.


SNNPRS is the most known potential area in the country in honey production. In the
region there are 1,114,303 bee hives. The total annual honey yield from these hives is
7,383,925 kg which share 71.8 % from traditional hive, 27.6 % from modern hive and 0.6
% from intermediate hives.


Based on distribution of hive per km2 the two most productive areas are found to be Sheka
and Kefa zones which produce 509/ km2 and 341/ km2, respectively. The other four
important areas in honey production are Hadiya zone (249/km2), Amaro special wereda
(169/km2), Gedeo zone (128/km2) and Alaba special wereda (117/km2). The rest zones
range from 93 hive/km2 in Kambata zone to 28 hive per km2 in Burji zone.


Accordingly on the basis of the above discussions Masha town of Masha woreda is
selected as the best location.
                                       170- 11


VI.     MANPOWER AND TRAINING REQUIREMENT


A.      MANPOWER REQUIREMENT


The manpower requirement of the envisaged project is 18 persons. The list of manpower is
indicated in Table 6.1. The total annual labour cost including fringe benefits is estimated
at Birr 148,500.
                                          Table 6.1
                MANPOWER REQUIREMENT AND LABOUR COST


      Sr.             Description            Req.        Monthly          Annual Salary
      No.                                        No.   Salary (Birr)         (Birr)
      1.    General Manager                      1              2,000            24,000
      2.    Secretary/cashier                    1                  700           8,400
      3.    Production Head                      1              1,200            14,400
      4.    Operators                            4              2,400            28,800
      5.    Fitters                              4              1,600            19,200
      6.    Labourers                            5              1,500            18,000
      7.    Guard                                2                  500           6,000
                       Sub-Total                 18             9,900           118,800
                   Benefits (25% BS)                            2,475            29,700
                      Grand Total                              12,375           148,500


B.      TRAINING REQUIREMENT


Currently, government, private and other institutions are training several students on wood
work. In addition, experienced operators and fitters can be assigned for the job. Therefore,
the is no need of training arrangement for the envisaged project.
                                     170- 12


VII.   FINANCIAL ANALYSIS


The financial analysis of the   bee hives frame project is based on the data presented in the
previous chapters and the following assumptions:-


Construction period                   1 year
Source of finance                     30 % equity
                                      70 % loan
Tax holidays                          3 years
Bank interest                          8%
Discount cash flow                    8.5%
Accounts receivable                   30 days
Raw material local                    10 days


Work in progress                      2 days
Finished products                     30 days
Cash in hand                          5 days
Accounts payable                      30 days


A.     TOTAL INITIAL INVESTMENT COST


The total investment cost of the project including working capital is estimated at Birr 1.81
million, of which 23 per cent will be required in foreign currency.


The major breakdown of the total initial investment cost is shown in Table 7.1.
                                   170- 13


                                         Table 7.1
                           INITIAL INVESTMENT COST


                Sr.                                          Total Cost
                No.              Cost Items                  (‘000 Birr)
               1      Land lease value                           80
               2      Building and Civil Work                 1,500.00
               3      Plant Machinery and Equipment            90.00
               4      Office Furniture and Equipment             25
               5      Vehicle                                    0
               6      Pre-production Expenditure*                75
               7      Working Capital                          40.74
                      Total Investment cost                   1,810.7
                                Foreign Share                    23


* N.B Pre-production expenditure includes interest during construction ( Birr 133.04
thousand ) and Birr 150 thousand costs of registration, licensing and formation of the
company including legal fees, commissioning expenses, etc.




B.     PRODUCTION COST


The annual production cost at full operation capacity is estimated at Birr 599,800 (see
Table 7.2).   The material and utility cost accounts for 34.5 per cent, while repair and
maintenance take 4.17 per cent of the production cost.
                                        170- 14


                                           Table 7.2
          ANNUAL PRODUCTION COST AT FULL CAPACITY ('000 BIRR)


                                  Items                  Cost       %
                      Raw Material and Inputs
                                                        191.44    31.92
                      Utilities
                                                        15.47      2.58
                      Maintenance and repair
                                                          25       4.17
                      Labour direct
                                                        71.28     11.88
                      Factory overheads
                                                        23.76      3.96
                      Administration Costs
                                                        47.52      7.92
                      Total Operating Costs
                                                        374.47    62.43
                      Depreciation
                                                        101.5     16.92
                      Cost of Finance
                                                        123.83    20.65
                      Total Production Cost            599.80    100


C.        FINANCIAL EVALUATION


1.        Profitability


According to the projected income statement, the project will start generating profit in the
first year of operation. Important ratios such as profit to total sales, net profit to equity
(Return on equity) and net profit plus interest on         total investment (return on total
investment) show an increasing trend during the life-time of the project.


The income statement and the other indicators of profitability show that the project is
viable.
                                      170- 15


2.     Break-even Analysis


The break-even point of the project including cost of finance when it starts to operate at
full capacity (year ) is estimated by using income statement projection.


                               BE =          Fixed Cost       =   27 %
                                      Sales – Variable Cost


3.     Payback Period


The investment cost and income statement projection are used to project the pay-back
period. The project’s initial investment will be fully recovered within    6 years.


4.     Internal Rate of Return and Net Present Value


Based on the cash flow statement, the calculated IRR of the project is 16 % and the net
present value at 8.5 % discount rate is Birr 478,820.


D.     ECONOMIC BENEFITS


The project can create employment for 18 persons. In addition to supply of the domestic
needs, the project will generate Birr 486,510 in terms of tax revenue

								
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